Marco Rubio's sweet protectionism: the 2016 hopeful gives the feds cover to keep propping up Big Sugar.

Authorde Rugy, Veronique
PositionColumns - Column

IMAGINE YOU OWN a business that sells an unprofitable product. But you've done me favors in the past and I expect you to do me more in the future, so I decide to lend you the money your business needs to stay in operation. Should you find that you can't pay me back, you needn't worry, I'll take a massive shipment of your unprofitable product instead. Of course, I'd rather not deal with that headache, so I go to great lengths to make sure that your lower-cost competition is at a disadvantage, thus ensuring a market price for your product that will be sufficient to repay my loan.

Heads you win, tails you win!

It may sound crazy, but that's exactly what the Department of Agriculture (USDA) does to protect a politically powerful cartel of domestic sugar processing companies. It is a mind-numbingly complex arrangement that would have made a Soviet central planner blush. But the sugar lobby has successfully bought off enough politicians to keep the gravy train rolling for decades. Its latest defender: Republican presidential aspirant Marco Rubio.

Here's how the sugar racket works: The federal government offers loans to sugar cane and beet sugar processors, who in turn agree to pay sugar growers a minimum price set by the USDA. The goal is for processors to obtain a market price for their sugar that is sufficient to pay back the loan. But because the loans are "non-recourse," if the market price for sugar drops, processors can instead forfeit to the USDA the sugar they put up as collateral.

To prevent sugar processors from offloading sugar onto the USDA--and to shelter the processors from lower-cost foreign competition, further ensuring they'll receive an artificially inflated price--the federal government imposes a two-tier system of tariff rate quotas that serve as a sugar import barrier.

It also restricts the total amount of sugar that domestic processors can sell by setting "marketing allotments." These too are intended to drive up the price by creating an artificial scarcity. According to law, each year the USDA sets the overall amount of sugar that can be processed for domestic sale at "not less than 85 percent of the estimated quantity of sugar for domestic human consumption for the crop year." As Figure 1 shows, a cartel of 14 processors share the allotment, with the top 5 receiving 63 percent of the total for Fiscal Year 2016.

According to the Center for Responsive Politics, Big Sugar spends an average of $6 million a year lobbying...

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